Nigerian manufacturers have raised concerns over the continuous decline in the demand for locally produced goods and services, fuelling a slump in production activities in the sector.
Efe Odia, a small-scale manufacturer of footwear, complained that his company has not been making sales, unlike some months back when people still managed to buy items from him.
“Sales have been very slow,” he said.
“Some of my close clients who specially request for footwear have not patronised me in a whole month. They are all complaining that there is no money even when I offered to sell below production price,” he further said.
In order to survive, Odia has to compliment his footwear business with his tricycle transport business which he engages in during the day. Just like Odia, other manufacturers— both in the medium and small scale— complain about the drop in sales and product demand despite the large market the country offers, coupled with its teeming population.
A sectoral report released recently by CSL research states that the demand for locally manufactured products has declined due to economic conditions constraining consumer purchasing power and is also a part of the reasons for the drop in production level of the manufacturers.
Members of the Manufacturers Association of Nigeria (MAN) recorded inventory of unsold finished goods totalling N375.42 billion in 2018 and N321.12 billion in 2018.
“High inventory of unsold finished manufactured goods in the period was ascribed low consumption, smuggling, and counterfeiting of Nigerian manufactured products,” MAN said in its recent economic review.
Major manufacturers are feeling the hit.
Flour Mills of Nigeria’s revenue fell 3 percent to N527.4 billion in March 2019, as against N542.7 billion in March 2018. Profit from continuing operations slumped by 71 percent to N4 billion, from N13.61 billion in the previous year.
Guinness Nigeria recorded N131.5 billion in turnover in the year ended June 30, 2019, which was a decline of 8 percent when compared with N143 billion in the corresponding period of 2018. The decline cut across both the domestic and export sales. In the domestic market, Guinness realised N124.9 billion, a decline of 7.9 percent when compared with N135.7 billion it made in the same market during a corresponding period of 2018.
McNichols, a producer of consumer goods, was hit by the economic headwinds as its revenue dropped by 17 percent to N355 million, from N430 million in the 2018 financial (full) year. The company’s profit before tax was N20.9 million in 2018 but it dropped to N15.4 million in 2019.
The Nigerian Breweries is also hard hit by low consumer demand. The brewer’s sales fell by 5.9 percent. Local sales in the financial year ended stood at N324.20 billion, representing 5.9 percent decline.
PZ Cussons is also facing tough times with series of losses caused by smuggling and low purchasing power made worse by intense competition in the soap and detergent sub-sectors.
Adesola Sotande-Peters, vice president of finance at Unilever Nigeria, recently said during a breakfast meeting that the Fast Moving Consumer Goods (FMCG) firm is battling with low consumer purchase as the sector is highly dependent on foreign exchange for raw materials which increases its cost of production.
Many Nigerians can no longer afford basic items. Poverty rate in Nigeria is highest in the world, with 98 million people falling below the line. Unemployment rate is 23.1 percent.
Experts say that following the trends in previous years, the 4th quarter of the year, which is characterised by festive activities, could experience improved activities as well as risen sales which will boost margins.
Gbemi Faminu
